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Friday, October 7, 2016

it is a settled legal position that there cannot be any estoppel against law. When there is a legal provision to the effect that when tea is used as raw material, no tax exemption would be available under the provisions of the Act, none can claim tax exemption in respect of sales tax payable on purchase or sale of tea. It is true that an eligibility certificate had been issued to the appellant-Company in pursuance of the 1986 Incentive Scheme of Government of Assam but when the said Scheme was given a statutory form under the Act, ‘tea’ had been excluded from the definition of raw material and therefore, on the basis of the eligibility certificate issued under the 1986 Incentive Scheme of Government of Assam, the appellant cannot claim any benefit. It is also pertinent to note that the respondent-Authorities have rightly held that the appellant was not in the business of ‘manufacturing’ tea but was merely blending and packing tea, which does not amount to ‘manufacturing’ of tea. We find substance in the said stand taken by the respondent-Authorities as the said view has been fortified by a decision of this Court in Commissioner of Income Tax, Kerala v. Tara Agencies 2007 (6) SCC 429.

1. Being aggrieved by the common judgment delivered by the Gauhati High
Court on 14th November, 2006, the appellants have approached this Court by
way of these appeals.

2. The facts giving rise to the present litigation, in a nutshell, are
as under:

As the legal issues involved in all of the aforesaid appeals are
same, for the purpose of convenience, we have taken facts from Civil Appeal
No.2806 of 2009.

3. The appellant is a private limited company engaged in the business of
blending and packing of tea. After some modernisation, it commenced its
production in April, 1988. The case of the appellant-Company was with
regard to availing sales tax concession declared by the respondent-State.
Before going through the relevant provisions, we may record the fact that
the respondent-State had notified its Industrial Policy in 1982, which had
thereafter been revised in 1986. The said Policy had been framed so as to
increase economic and industrial growth in the State.

4. In pursuance of the aforestated Policy, the respondent-State enacted
Assam Industries (Sales Tax Concession) Act, 1987 (hereinafter referred to
as “the Act”). By virtue of the provisions of the Act, certain new
industries, subject to certain conditions, were to be given exemption from
payment of sales tax but the exemption was not to be given in respect of
certain commodities.

5. The case of the appellant-Company was that the Company was made
eligible for certain concessions in pursuance of the Industrial Policy
framed by the government, which had been declared in 1982, but ultimately
the benefits had been denied to the company under the Act.

6. The reason for not giving the benefits under the Act, as stated by
the respondent- Authorities, was that ‘tea’ was a raw material, in respect
of which no exemption was to be given and the appellant-Company was merely
blending and packing tea and was not having any manufacturing activity.

7. As the sales tax exemption had been denied to the appellant-Company,
the appellant-Company filed petitions before the High Court challenging
denial of the tax exemption but the petitions had been rejected by a common
Judgment dated 9th September, 2003 and being aggrieved by the rejection of
the petitions, the appellant-Company had also filed writ appeals, which
have been dismissed by a common Judgment dated 14th November, 2006, and the
said judgment has been challenged in these appeals.

8. The learned counsel appearing for the appellant-Company mainly
submitted that the appellant-Company had been given an eligibility
certificate dated 7th July, 1988 under the 1982 Incentive Scheme of
Government of Assam as amended in 1986. By virtue of the said certificate
dated 7th July, 1988, exemption in respect of payment of sales tax had been
granted to the appellant-Company w.e.f. 14th April, 1988 to 13th April,
1993, as the appellant- Company was eligible to get the exemption from
payment of sales tax under the 1986 Incentive Scheme of Government of
Assam.

9. The learned counsel further submitted that as per the exemption
granted under the eligibility certificate, the respondent-State and the
Sales Tax Authorities of the respondent-State were bound to give exemption
from payment of sales tax to the appellant, but the appellant had been
denied the exemption, which was neither fair nor legal. He further
submitted that as per the conditions incorporated in the scheme, the
appellant-Company had already made investments and had already employed
local persons of the State of Assam in service. Having complied with all
the conditions, the eligibility certificate had been issued to the
appellant-Company and therefore, the respondent-Authorities are estopped
from denying the benefit which had been assured to it under the eligibility
certificate dated 7th July, 1988. The learned counsel cited several
judgments to substantiate his case that once an assurance was given to the
appellant under the eligibility certificate that the appellant-Company
would be enjoying exemption under the 1986 Incentive Scheme of Government
of Assam, the exemption could not have been withdrawn by the respondent-
Authorities.

10. On the other hand, the learned counsel appearing for the State
Authorities supported the judgments delivered by the learned Single Judge
as well as by the Division Bench of the High Court.

11. The learned counsel submitted that there cannot be any estoppel
against legal provisions. He further submitted that as per Rule 2(f) of
Assam Industries (Sales Tax Concession) Rules, 1988, ‘tea’ is not the raw
material in respect of which exemption from payment of sales tax is to be
granted. In view of the aforestated statutory provision and in view of the
fact that tea was the ‘raw material’ which was being used by the appellant-
Company for the purpose of blending and packing, the appellant was not
entitled to any exemption.

12. Moreover, he submitted that the appellant- Company was not involved
in any manufacturing activity. It was merely blending and packing tea and
blending as well as packing of tea was not a manufacturing activity and
therefore, also the appellant was not entitled to the benefit claimed by
it.

13. The learned counsel thereafter submitted that according to the
provisions of Section 4 of the Act, Certificate of Authorisation should
have been procured by the appellant for availing the benefit under the Act.
Such a Certificate of Authorisation had never been issued to the appellant-
Company and therefore, the appellant was not entitled to the exemption in
respect of payment of sales tax claimed by it.

14. For the aforestated reasons, the learned counsel submitted that the
appeals deserved to be dismissed.

15. We have heard the learned counsel at length and have considered the
relevant legal provisions and the judgments referred to by the learned
counsel.

16. Upon perusal of the record and the law laid down by this Court in the
light of the facts of the case, we are of the opinion that the view
expressed by the Courts below cannot be said to be incorrect.

“2(f) ‘Raw material’ means any material or commodity capable of being used
for manufacture of any other product specified in any authorisation
certificate as intended by the holder for use by him as raw material in the
manufacture of goods in the State for sale by him but shall not include the
following commodities namely :

In view of the aforestated Rule, it is crystal clear that tea is not to
be included in “raw material” and therefore, no exemption could have been
claimed by the Appellant Company in respect of ‘tea’ as a raw material for
purchase as well as sale of tea. It is also pertinent to note that the
appellant had earlier preferred Civil Rule No.4162 of 1991 before the High
Court challenging validity of the aforestated Rule. The learned Single
Judge, while rejecting the petition, vide order dated 17th August, 1988
held that Rule 2(f) of the 1988 Rules was legal and valid and the plea of
promissory estoppel raised by the appellant was also not accepted. Against
the said judgment, no appeal was filed by the appellant and therefore, the
said issue had attained finality.

18. Another important thing is with regard to certificate of
authorisation.

19. It is an admitted fact that so as to avail the benefit as per Section
4 of the Act, certificate of authorisation is a must. The said Section
reads as under:

“4. Certificate of authorisation –

(1) A person undertaking to manufacture in the State such goods, as may be
prescribed, may make an application in the prescribed form to the
prescribed authority and within the prescribed time for a certificate of
authorisation for the purposes of sub-section (1) of section 3.

(2) If the authority to whom an application is made under sub-section (1)
is satisfied that the application is in conformity with the provisions of
the Act and the rules made there under it shall grant to the applicant a
certificate of authorisation in the prescribed form which shall specify the
class or classes of goods for purposes of sub-section (1) of section 3 and
the period for which it shall remain valid.

(3) A certificate of authorisation granted under this section shall
remain valid for a period of five years from the date of completion of
effective steps for setting up the industrial unit in respect of which the
certificate is granted.

(4) No certificate of authorisation shall be granted under sub-section
(2) except in respect of such raw materials as may be prescribed.

(5) A certificate of authorisation granted under this section may:-

(a) be amended by the authority granting it if he is satisfied either on
the application of the holder or, where no such application has been made,
after due notice to the holder, that by reason of the holder having changed
the name, place or nature of his business or the class or classes of goods
bought, sold or manufactured by him or for any other reason the certificate
of authorisation granted to him required to be amended; or

(b) be cancelled by the authority granting it, where he is satisfied
after due notice to the holder that the holder has ceased to carry on
business or for any other sufficient reason.”

20. As stated hereinabove, it is an admitted fact that no certificate ofauthorisation, as provided under the Act, had ever been granted to theappellant-Company and therefore, in our opinion, the courts below wereabsolutely right to the effect that the appellant was not entitled to anysales tax exemption.

21. So far as the averments with regard to estoppel are concerned, it isa settled legal position that there cannot be any estoppel against law.When there is a legal provision to the effect that when tea is used as rawmaterial, no tax exemption would be available under the provisions of theAct, none can claim tax exemption in respect of sales tax payable onpurchase or sale of tea. It is true that an eligibility certificate hadbeen issued to the appellant-Company in pursuance of the 1986 IncentiveScheme of Government of Assam but when the said Scheme was given astatutory form under the Act, ‘tea’ had been excluded from the definitionof raw material and therefore, on the basis of the eligibility certificateissued under the 1986 Incentive Scheme of Government of Assam, theappellant cannot claim any benefit.

22. It is also pertinent to note that the respondent-Authorities haverightly held that the appellant was not in the business of ‘manufacturing’tea but was merely blending and packing tea, which does not amount to‘manufacturing’ of tea. We find substance in the said stand taken by therespondent-Authorities as the said view has been fortified by a decision ofthis Court in Commissioner of Income Tax, Kerala v. Tara Agencies 2007 (6)SCC 429.

23. For the aforestated reasons assigned by the State in the impugned
order passed as well as in the judgments delivered by the High Court, we
cannot find fault with the impugned judgment and therefore, these appeals
deserve dismissal.

24. The appeals are accordingly dismissed. However, there shall be no
order as to costs.